You have to be business intelligent nowadays. Don’t you feel this is a “must-have” buzz phrase in any business report you write, no matter the financial services industry in which you work? The first time someone used the term “business intelligence” (BI) was more than 150 years ago. It was used to describe how a banker took advantage of information to make decisions that helped him stay ahead of the competition. We bet Sir Henry Furnese, the banker in question, didn’t have to deal with an overwhelming amount of data at that point in time. Needless to say this is no longer the case.
Data, “the new oil”, as they call it, is now abundant. BI business decisions based on data are ubiquitous in the financial services industry. There’s one sector where investment decisions, portfolio performance and industry operations are opening up to the power of data: real estate.
Still relatively traditional, the sector is now trying to catch up with technology trends – artificial intelligence (AI), blockchain, drones, virtual reality (VR), augmented reality (AR), among others – leaving behind manual processes and making data the fuel for efficiency improvements, service innovation, better investment decisions and, ultimately, distinctiveness.
This article is a short trip to how data-driven technologies are paving the way for a real estate industry practice in which data is an energy that will transform and make this industry hot.
Data is flowing
Back in the 60’s and 70’s, only very specialised people could read, interpret and get insight from data. It wasn’t exchangeable, but rather stored in silos depending on the source. Today, data sources are abundant and so is their nature. For impactful business insights, a real estate business in financial services needs cross-departmental input sources and external sources as well. The larger the data set, the better is a suitable quote to illustrate the case. Similarly, operational, economic and behavioural data are necessary for better decisions within the organisation, for product and service development and for investment.
Data is key, or so they say. While that’s a true general statement, it’s not fully accurate. Meaningful data is key, we prefer to say. Commonly, data solutions are composed of four processes: they manage data, perform analytics, create visualisations and give answers or insights. You may have the best real estate data solution, but the meaningfulness and the quality of the data you input will determine the depth of the answers you get. It’s a simple cause-effect relationship.
“Datinctiveness” is the new trend
Manual processes are still common in real estate businesses. For the ones catching up with data-driven technology, this is a unique chance to distinguish themselves and stand out from the competition.
There is an ongoing discussion in the financial services sector about how newcomers will impact incumbents. These agile, tech-friendly smaller organisations bring about user-centric digital technologies meant to disrupt the financial services world, as we know it.
While old, traditional organisations have the market knowledge, the reputation and the network, new comers have the technology, the user-centric approach, the charisma and the innovativeness. What if, instead of playing the disruption game, they team up? That’s a positive tendency we see actually happening.
However, if Luxembourg real estate incumbents have to battle to remain in the market, they are well equipped. Below we have listed the strengths that are arming these entities now as they navigate technology transformation.
Technical skills and in-depth industry knowledge
Diversity of services, covering the entire investment life-cycle
Cross-border structures. In fact, real estate businesses are a unique point of contact offering cross-border services directly from the Grand Duchy.
Data infrastructure. Luxembourg has the larger number of sites labeled TIERIV in Europe, which fortifies the country in the case of the worst scenarios of technical incidents without technical interaction.
Not having a data strategy isn’t a strategy
New technologies affect operations, people (clients, employees and other stakeholders), customer engagement, compliance and, ultimately, business models. We reached out to Arnaud Brive, Real Estate Manager, to learn how new data driven technologies are transforming the real estate sector. Here are the six most relevant tendencies he described:
In the medium and long term, AI together with blockchain will strongly affect portfolio management. In the short term, blockchain will replace intermediaries that make processes more complex and inefficient.
Artificial intelligence will make the execution of budgeting, planning and control processes more efficient and effective. With the increase of data availability, data linked to markets, portfolio investment and user behaviours – machine learning will be helpful for risk optimisation.
Software robotics, also called Robot Process Automation – RPA, connected with AI will make highly repetitive processes such as evaluating listings during deal sourcing more efficient. This will also allow for cost-effective acquisitions.
The availability of the data obtained via sensors and drones and their visual processing (VR and AR) will change the nature of the interaction between investors and companies in the long term.
Mobile technologies and the internet of things (IoT) will greatly influence investor behaviour. Investors are already using smartphones and tablets to search for information or to compare services and prices.
Real estate funds are seeking to diversify their portfolios at the international level. Cross-border transactions have now become commonplace for real estate funds, but they are usually inefficient due to high transaction fees and the slow pace of transactions. A cross-border ledger with blockchain technology could solve this problem. Indeed, many companies have already acknowledged the problem and are working on blockchain-based products that can revolutionise this process.
Have you turned on the data-engine of your real estate business? If not, now is the time. Not having a data strategy isn’t a strategy.
What we think
Arnaud Brive, Manager at PwC Luxembourg
The processes within the Real Estate industry are still largely manual, for example the subscription and redemption of fund units. These will be completely transformed and simplified by blockchain processes, although it’s still in the future. The key for real estate organisations in the coming years will be to implement efficient and cross-organisational solutions where disruptions caused by new technologies in the business model will come from the reduction of intermediaries.
